INDEPENDENT DIRECTOR

According to Section 149 of the Act, every listed company shall have at least one-third of total number of directors as Independent directors. The central government may prescribe minimum number of independent directors in other class or classes of public companies. The Act deals with provisions related to independent directors in details as discussed earlier here.

According to Rule 4 companies (Appointment and Qualification of Directors) Rules 2014, the following class or classes of companies shall have at least two directors as independent directors –

(i) The public companies having paid up share capital of ten crore or more; or

(ii) The public companies having turnover of one hundred crore or more; or

(iii) The public companies which have in aggregate outstanding loans, debentures and deposits exceeding fifty crore rupees.

In case a company covered under this rules required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it.

Any intermittent vacancy of an independent director shall be filled – up by the Board at the earliest but not later than immediate next Board meeting or three month from the date of such vacancy whichever is later. This is relevant to note, according to Section 173 of the Act, there will not be a gap of more than one hundred and twenty days intervene between two consecutive meetings of the Board.

Where a company cease to fulfil any of three conditions laid down in the this Rule for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any such condition (again). According to explanation to the Rule; the paid up share capital or turnover as on last date of latest audited financial statement shall be taken into account.

A company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirement specified in such law.

A body, institute or association (hereinafter to be referred as “the agency”), which has been authorised in this behalf by the Central Government shall create and maintain a data bank of persons willing and eligible to be appointed as independent director and such data bank shall be placed on the website of the Ministry of Corporate Affairs or on any other website as may be approved or notified by the Central Government. [Sub – rule (1) of Rule 6]

The data bank shall contain the following details in respect of each person included in the data bank to be eligible and willing to be appointed as independent director-

(a) DIN (Director Identification Number);

(b) the name and surname in full;

(c) income-tax PAN ;

(d) the father’s name and mother’s name and Spouse’s name (if married) ;

(e) the date of Birth;

(f) gender;

(g) the nationality;

(h) the occupation;

(i) full Address with PIN Code (present and permanent);

(j) phone number;

(k) e-mail id;

(l) the educational and professional qualifications;

(m)experience or expertise, if any;

(n) any legal proceedings initiated or pending against such person;

(o) the list of limited liability partnerships in which he is or was a designated partner along with –

the name of the limited liability partnership;

the nature of industry; and

the duration with dates;

(p) the list of companies in which he is or was director along with –

the name of the company;

the nature of industry;

the nature of directorship – Executive or Non-executive or Managing Director or Independent Director or Nominee Director; and

duration – with dates. [Sub – rule (2) of Rule 6]

A disclaimer shall be conspicuously displayed on the website hosting the databank that a company must carry out its own due diligence before appointment of any person as an independent director and “the agency” maintaining the databank or the Central Government shall not be held responsible for the accuracy of information or lack of suitability of the person whose particulars form part of the databank. [Sub – rule (3) of Rule 6]

Any person who desires to get his name included in the data bank of independent directors shall make an application to “the agency” in Form DIR – 1. [Sub – rule (4) of Rule 6]

The agency may charge a reasonable fee from the applicant for inclusion of his name in the data bank of independent directors. [Sub – rule (5) of Rule 6]

Any person who has applied for inclusion of his name in the data bank of independent directors or any person whose name appears in the data bank , shall intimate to the agency about any changes in his particulars within fifteen days of such change. [Sub – rule (6) of Rule 6]

The databank posted on the website shall –

(a) be accessible at the specified website;

(b) be substantially identical to the physical version of the data bank;

(c) be searchable on the parameters specified in sub-rule (2);

(d) be presented in a format or formats convenient for both printing and viewing online; and

(e) contain a link to obtain the software required to view or print the particulars free of charge. [Sub – rule (7) of Rule 6]

Form DIR – 1 actually show a basic form and need suitable modification by the Data Bank to align with Requirement of Sub – rule (2) of Rule 6 and requirement of the industry.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

I have seen some listed companies AGM Notice. Some companies appoint existing ID’s for a period of 5 years from 1st April 2014. While some companies appoint existing ID’s for a period of 5 years from the date of AGM.

Writer of this blog, Aishwarya Mohan Gahrana is Practicing Company Secretary and Insolvency Professional working with M/s Aishwarya M Gahrana & Associates, a New Delhi based peer reviewed firm of company secretaries having pan India presence through friends and associates. This blog is a knowledge sharing initiative. Views expressed here is of writer; not of the organization(s) he is working with.